Bulls make come back on Dalal Street; Sensex reclaims 35,400 mark

Snapping two-day losing streak, Indian equity benchmarks ended Friday’s session on optimistic note, with key gauges recapturing there crucial 35,400 (Sensex) and 10,700 (Nifty) levels, amid firm global markets. The bourses started the session in green with the International Monetary Fund (IMF) suggesting steps to sustain the high growth rate which India has achieved. It said that the country should carry out banking sector reforms; continue with fiscal consolidation, simplify and streamline GST; and renew impetus on reforms. Investors took some encouragement with Economic Affairs Secretary Subhash Chandra Garg’s statement that India has adequate ‘firepower’ of foreign exchange reserves to deal with the current volatility in the rupee. Some support also came with Secretary of the Department of Expenditure under Finance Ministry Ajay Narayan Jha’s statement that the fiscal deficit, which is the difference between total revenue and expenditure, for the current financial year (FY19), will be maintained at 3.3% of the gross domestic product (GDP) and the fiscal consolidation of the country is as per the ‘commitment’.

In the second half of the session, the key indices rallied further to reach near their intraday high points, on the back of fresh buying by funds and retail investors. The markets participants took support with a private report stating that the second quarter of calendar year 2018 saw the biggest ever private equity (PE) investments in India. The PE firms have invested a record $8.2 billion during the quarter ended June 2018, an increase of 60% compared with $5.1 billion in the same period last year. The street paid no heed towards the World Bank’s latest report stating that the India may see 2.8% fall in GDP by 2050, amid rising temperatures and changing monsoon rainfall patterns from climate change. Investors even overlooked Finance Minister Piyush Goyal’s statement that strong action would be taken against illicit Swiss deposits. He further noted that India would start getting details of bank accounts from Switzerland under a bilateral treaty. Meanwhile, the fiscal deficit for the first two months of the current fiscal FY19 stood at 55.3% or Rs 3.455 lakh crore of the budgeted target of Rs 6.243 lakh crore.

On the global front, European markets were trading in green, after European Union leaders reached a compromise deal on migration, helping avert a political crisis in Germany. In economic releases, UK consumer sentiment weakened in June largely on weak economic outlook. As per survey data from market research group GfK, the consumer confidence index fell to (-) 9 from (-) 7 in May. Besides, French consumer price inflation accelerated in June on energy and food product prices. As per provisional estimate from the statistical office Insee, consumer price inflation rose to 2.1 percent from 2 percent in May, matching expectations. Asian markets ended in green terrain, following the positive cues overnight from Wall Street and with report that China has eased restrictions on foreign investment amid rising trade tensions.

Back home, stocks related to textile sector ended higher, aided by Textile Commissioner Kavita Gupta’s statement the technical textiles industry is projected to grow at 20 percent year-on-year and the segment's potential is largely untapped in the country. Selected stocks of export related companies remained in focus, after India's spices exports increased by 8 per cent to record 10.28 lakh tonnes in the last fiscal, but the growth was marginal in value terms at Rs 17,929 crore.

Finally, the BSE Sensex rose 385.84 points or 1.10% to 35,423.48, while the CNX Nifty was up by 125.20 points or 1.18% to 10,714.30.

The BSE Sensex touched a high and a low of 35,459.05 and 35,099.65, respectively and there were 24 stocks advancing against 7 stocks declining on the index.
The broader indices ended in green; the BSE Mid cap index surged by 1.81%, while Small cap index up by 1.92%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 2.94%, Metal up by 2.82%, Capital Goods up by 2.80%, Oil & Gas up by 2.78% and Utilities up by 2.65%, while there were no losing sectoral indices on the BSE.

The top gainers on the Sensex were Tata Steel up by 3.61%, Yes Bank up by 3.16%, Reliance Industries up by 2.99%, Larsen & Toubro up by 2.86% and Adani Ports & SEZ up by 2.75%. On the flip side, Indusind Bank down by 1.45%, Hero MotoCorp down by 1.19%, HDFC Bank down by 1.17%, Mahindra & Mahindra down by 1.15% and Sun Pharma down by 0.83% were the top losers.

Meanwhile, Finance Secretary Hasmukh Adhia has said that the new Goods and Services Tax (GST) return forms would be rolled out from January 1 after successful beta-testing of the software. He also said that wrong input tax credit claims are a potential area of evasion in the new tax regime and one-to-one invoice matching is the key to checking evasion.  He noted that invoice matching has to happen in the GST system. Besides, he said “The only thing is the way we collect details about invoices is what matters. So in the new system of filing return we will have all the sales invoice being uploaded along with returns only for B2B. For B2C you don't need to give invoice wise details at all.”

Adhia further stated that while GST collection every month is about Rs 94,000 crore to Rs 1 lakh crore, the total tax liability discharged by businesses every month is Rs 5 lakh crore.  He said “But Rs 4 lakh crore of this liability is being discharged by way of input tax credit claims. Now you can understand what a scope (is) for improving our revenue if we streamline and if we have a check on input tax credit.” Moreover, he pointed out that the only place where there is a scope for tax evasion is in the area of claiming wrong ITC and that's an area which can be plugged by using technology. He said “Even if we make a 10 per cent difference in Rs 4 lakh crore by keeping an eye on them (wrong ITC claims), by having a one-to-one invoice matching, what an improvement in revenue collection can happen.”

Talking on scope for rationalisation of items in the 28 percent tax bracket, the Secretary said that that reducing the number of items in the tax slab would depend on revenue position of the government. He also noted that there are 50 items left in the highest tax slab and most of these items attract a cess as these are either demerit or luxury goods. Besides there are some construction and automobile items. He said “We have not still reached the magic number of Rs 1 lakh crore (revenue) every month consistently. We will have to keep watching our revenue and whenever there is a scope created for giving more concessions, then we can one by one or in batches we can start looking at those items.”

The CNX Nifty traded in a range of 10,723.05 and 10,612.35. There were 40 stocks in green as against 10 stocks in red on the index.

The top gainers on Nifty were GAIL India up by 6.48%, Titan up by 4.82%, Hindalco up by 4.14%, Bajaj Auto up by 3.42% and Tata Steel was up by 3.38%. On the flip side, Dr. Reddy’s Lab down by 2.73%, Tech Mahindra down by 1.66%, Indusind Bank down by 1.53%, Hero MotoCorp down by 1.38% and Mahindra & Mahindra down by 1.23% were the top losers.

All European markets were trading in green; UK’s FTSE 100 gained 48.43 points or 0.63% to 7,664.06, France’s CAC increased 55.27 points or 1.04% to 5,330.91 and Germany’s DAX was up by 122.43 points or 1.00% to 12,299.66.

Asian equity markets ended higher on Friday after China eased restrictions on foreign investment in sectors including banking, automotive, heavy industry and agriculture amid scrutiny from its top trading partners, the United States and the European Union. They were complaining that Beijing limits foreign firms' ability to enter the world's second-largest economy. Chinese shares ended higher, the largest single-day gain since August 2016, as authorities eased foreign investment curbs. Speculation was also rife that the People's Bank of China will lower the reserve ratios for some banks next week. Further, Japanese shares ended modestly higher as the yen fell out of favor and EU leaders reached a deal on migration after more than 12 hours of negotiations.